The vice-chancellor of the University of NSW has criticised the Federal Government for failing to cut red tape, which he says is strangling Australian universities.

Fred Hilmer has used an address to the National Press Club to call for a three-part overhaul of the sector.

Professor Hilmer says the overhaul should include deregulating the setting of fees for undergraduate courses and adopting a long-term national strategy for research.

He says too many policy changes, combined with a lack of opposition by university leaders, have led to oppressive government regulation and chronic under-funding.

Professor Hilmer says the red tape is affecting the ability of universities to compete on the world stage.

"It's something that I point out that we were promised by the current Prime Minister when she was minister for education and I think used a phrase along the lines of 'I plan to take the foot off the throat of the universities in terms of regulation'," he said.

"We're still waiting."

Professor Hilmer says he and other vice-chancellors must take a stronger stand on policy change.

"Our natural reaction was let's see if we can make this work, let's see if we can't make it less bad than it's going to be, and that's exactly the wrong reaction," he said.

"I think we just need to say no and give reasons why not and not be as compliant, because it's that compliance and lack of advocacy which has led us into this policy morass."